Bright Blue has today responded to elements of the Government’s Spending Review.

Tax Credits

The Government will not proceed with the changes to the tax credit threshold and taper announced at the Summer Budget 2015. The tax credits income threshold will remain at £6,420 from April 2016 and the tax credits taper will remain at 41% of gross income.

Commenting, Senior Research Fellow of Bright Blue, David Kirkby, said:

“The Chancellor’s decision not to proceed with the proposed cuts to Tax Credits is the right one, as Bright Blue has urged. Tax Credits are claimed by those in-work and are a vital means of supporting working families struggling to make ends meet. The proposed cuts would have cost affected families an average of £1,300 a year and damaged work incentives. 

The Chancellor deserves credit for listening to the concerns raised in recent months about the proposed cuts and for responding to them. This decision underlines the commitment to stay on the side of workers. The Chancellor should now look to make changes to Universal Credit - which will replace Tax Credits in the coming years - in order to better support those on modest incomes. As Bright Blue has called for, a Contribution Supplement should be introduced to Universal Credit which would ensure that those who have contributed more into the system by paying more National Insurance should receive more when they are in need.”

Childcare

The Government will invest over £1 billion more a year by 2019-20 in free childcare places for 2, 3 and 4 year-olds. To enable the doubling of free childcare for 3 and 4 year-olds with working parents, the Government will invest at least £50 million of capital funding to create additional places in nurseries and over £300 million a year to increase the average hourly rate paid to childcare providers.

Commenting, Director of Bright Blue, Ryan Shorthouse, said:

“Considering the ongoing fiscal constraints, the Government is investing an impressive amount in making childcare affordable. Especially with new funding for providers to deliver the extended early years free entitlement and the introduction of a new national early years funding formula, all providers must now ensure the free hours are offered as a stand alone package if this is what parents want. There should be serious consequences if they don't.

However, the real priority for childcare now is to boost quality to significantly enhance educational standards. It would be better if the Government used the money for extending the free entitlement to improve quality instead. Then it should be an expectation that all parents enrol their 3 and 4 year olds in quality pre-school education”.

Higher Education

The Government will introduce a generous new system of maintenance support for higher education students wishing to study part time by 2018-19 and will consult on the detail. The Government will also lift the age cap for new postgraduate loans, so they are available to all those under 60. These loans will be introduced from 2016-17. Students studying nursing, midwifery and allied health subjects from September 2017 will be moved on to the standard student support system, with the details subject to consultation. The cap on the number of student places universities can offer for these subjects will be removed.

Commenting, Researcher of Bright Blue, James Dobson, said:

“The Government is right to extend the new tuition fee loans to postgraduates to anyone aged under 60, rather than restricting them to the under-30s, as Bright Blue recently recommended.  Everyone should have the opportunity to reskill and upskill throughout their lives. This is a key part of ensuring people can work for longer in their lives and for boosting social mobility.

Our recent report showed the worrying decline in the number of part-time undergraduates and postgraduates since 2008-09. Government is right to focus on finding ways to reverse this trend. However, the extension of maintenance loans to them may not be the best response. Our research shows it is the cost of the tuition fees more than the cost of living which is the biggest barrier to prospective part-time higher education students. Currently, only around 31% of part-time students are eligible for tuition fee loans. It would be better for the Chancellor to prioritise extending the provision of tuition fee loans to cover more part-time students - including all those taking any equivalent or lower qualification - than to introduce maintenance loans. This could be achieved through a lifetime HE tuition fee loan account, as recently advocated by Bright Blue. 

“Giving student nurses loans rather than grants to pay for their tuition fees will bring them into line with almost all other undergraduates and will allow the Government to lift the cap on the number of student nursing places. This is a progressive move”.

Apprenticeships

The apprenticeship levy on larger employers announced in the Summer Budget will be introduced in April 2017. It will be set at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any paybill in excess of £3 million and that less than 2% of UK employers will pay it. The levy will be paid through Pay As You Earn. By 2019-20, the levy will raise £3 billion in the UK.

Commenting, Director of Bright Blue, Ryan Shorthouse, said:

“The apprenticeship levy has been set at a reasonable level and will require big businesses to assist with the costs of educating skilled employees. The Government should also consider introducing a graduate levy, as recently proposed by Bright Blue, to be paid for by large graduate employers to assist with the costs of more people going to university. Since large graduate employers are one of the main beneficiaries of increased participation in higher education - alongside individuals themselves and wider society - it's time for them to contribute their fair share”.